Wednesday, December 19, 2012

The Benefit and The Burden: Tax Reform, Why We Need It and What it Will Take, Bruce Bartlett, (NY: Simon & Shuster, 2012), 258 pages, $26.00

In the opening sentences of the Introduction author Bruce Bartlett tells readers the Federal tax code needs regular attention like a garden needs weeding. Even though the present weedy tangle can only be changed by Congress, Bartlett hopes his book on “the fundamentals of taxation at the simplest level” will help inform the public in the debate.

Bartlett uses the introduction to tell readers he wants to be fair and so confesses a short list of biases. He accepts the need for Federal taxes to take a higher share of GDP and recommends taxing consumption to get it. He believes tax expenditures to be the equivalent of spending. He supports a Value Added Tax but not the Alternative Minimum Tax.

The book has 24 chapters, none of them long and each confined to a single topic or focus. Bartlett labels the first nine chapters, the Basics, and starts with a brief history of federal income taxes and the legislative process of getting a tax bill through Congress.

Chapter 3 reviews many definitions of income that sometimes include and sometimes exclude capital gains, rents, dividends and interest. Bartlett cites economist Irving Fisher who believed interest was not income but the discounted value between present and future consumption. Others have argued it should be consumption and change in net worth, meaning taxes on unrealized capital gains.

Chapters 4 through 8 explain the mechanics of marginal, average and effective tax rates and their affect on tax revenue, economic growth and the business cycle. While explaining the mechanics he finds the wealthy have low average tax rates and then contradicts Senator McConnell and others who claim that tax cuts raise revenue in the long run. The Bush tax cuts reduced federal revenues $2.8 trillion from 2002 to 2011.

Bartlett turns a dubious eye on tax incentives promoting saving and growth, which he suggests do not guarantee more savings, especially if the government has to use them to pay for deficits. The question of progressive taxes gets a 6 page review where he shows progressive rates schedules do not guarantee progressive taxes when there are many exemptions and deductions.

Chapter 9 compares U.S. taxes to other countries. Many other countries have a higher ratio of taxes to Gross Domestic Product than the U.S. He provides tables to compare growth rates with the ratio of taxes to GDP, which also demonstrates that low taxes do not necessarily mean high growth and vice versa. He chides Americans for their provincial views on taxes. Other countries tax consumption more than the U.S. and make use of wealth taxes and environmental taxes that Americans refuse to consider.

The second section of eight chapters identifies and reviews problems of United States taxes: tax expenditures and tax treatment of health care, housing, state taxes, charitable contributions, capital gains, corporations, and tax administration. The tax expenditure chapters take on a disgusted tone describing how current practice erodes the tax base and primarily helps the well to do who save more with deductions from income in high tax brackets.

Bartlett cites health care as the biggest tax expenditure that treats employer sponsored health care as a business expense but not taxable for employees. Where other countries tax their citizens to provide health care, our Federal government disguises their spending through a tax deduction to business. He gives a federal income tax loss of $184 billion and another $250 billion of loss in payroll taxes, although he does not cite his numbers.

Bartlett reminds readers that tax expenditures make things like health care and housing artificially cheap and encourage over use. Deductions for mortgage interest and property taxes do so twice by encouraging more home building and then encouraging local governments to pad local projects paid with property taxes home owners can deduct from their federal taxes, but no benefit to renters.

The last section of seven chapters looks at the future. Bartlett does some review of previous tax reform and reform proposals like the flat tax, a national sales tax proposal, the Herman Cain nine-nine-nine and a few more, but reminds readers that tax cuts alone are not reform. A whole chapter makes the case for more federal revenue, but readers get a big dose of pessimism and a summary of views on the consequences of unsustainable debt.

Two chapters outline the case for and against the Value added tax, but the material includes so many political objections along with a variety of pros and cons these pages reads like a digression or a diversion. Finally, it is on to the Bush Tax cuts and what to do. He gives a listing of the many Bush tax cuts and some archival background before totaling $3 trillion added to Federal debt and declaring the failure of the Bush tax cut policy. Bartlett also gives an unfavorable review of the anti-tax Republicans and Grover Norquist before declaring they will probably be able to prevent tax reform. He gets more pessimistic by suggesting tax reform will be delayed until we have a Republican president and a Democratic Congress.

The book provides basic information to understand taxes and the larger economic issues they raise, but the book is not elementary. Previous effort working and experimenting with the arithmetic of tax calculations for a variety of personal income situations should be considered a minimum prerequisite. All his chapters end with a long list of further reading that allow advanced study for those with the interest.

Bartlett has had a long career in taxes, especially in Congress where he helped draft the Kemp-Roth tax reform back in 1986, but his knowledge and experience do not make him optimistic. He makes recommendations to expand the tax base and raise revenue to meet the needs of spending that “can’t be cut,” but tells readers how and why entrenched political attitudes will prevent them. The book feels sour in a way that befits the public mood for a book published in the year of the fiscal cliff. The fiscal cliff will pass but for better or for worse I am certain the Benefit and the Burden will continue to be relevant, I’m afraid for quite a few years. In that we can be sure Mr. Bartlett will agree.

Thursday, December 6, 2012

Post election analysis has turned to discussion of economic issues put off before the election. Health care expansion will go forward and tax and budget disputes will be settled by default with the fiscal cliff, or by compromise in the Congress. A recent article by Robert J. Samuelson [“It’s the Welfare State, Stupid,” Washington Post, November 12, 2012] includes the claim that Social Security and Medicare are part of the welfare state that undermines incentives to work and devalues “earned success.” He thinks these shortcomings justify using Social Security as a target for cut backs in the fiscal cliff settlement.

In spite of the fact that all of us working for a living have to pay social security taxes under threat of IRS reprisal, the claim that Social Security recipients receive welfare subsidies requires explanation in light of the many changes to Social Security passed by Congress. Start with the steep Social Security tax increases Congress passed during the early Reagan years. Along the way the retirement age was raised and two full years of benefits were canceled, and then Congress started to force social security recipients to pay taxes on their benefits. In 2011 taxes start for single people who earn other income greater than just $25,000, and for joint filers at just $32,000. Recently there were unfavorable adjustments to the cost of living formula. The idea social security recipients receive welfare subsidies after as many as 50 years (50=67-17) of payroll taxes require financial examples and documented proof that Samuelson fails to give.

We might also remind Mr. Samuelson that the social security tax has an income cap at $110,100, meaning that those with very high wages have a tax preference: their tax rate drops to zero after the cap. While the rest of us pay 7.65 percent on all our wage income the wealthy get all wages over the cap exempted. If he thinks this preference should be eliminated as an unjustifiable subsidy to the wealthy he did not say.

Medicare and Medicare payroll taxes were added to Social Security in the Johnson Administration because more and more private insurance companies refused to insure retired people who lost their tax subsidized employer health care benefits. Now Samuelson suggests Medicare recipients are getting a subsidy they don’t deserve when all those receiving employer sponsored health care share in tax subsidized health care they do deserve.

After attacking Social Security and Medicare Samuelson concludes Social Security benefits undermine work incentive that “devalues” the work ethic. He tells readers “If eligibility were higher, people would work longer.” What Mr. Samuelson would find if he bothered to look at the U.S. Bureau of Labor Statistics, Current Population Survey is that older people are already working longer, much longer, and they have been doing so for two decades.

Americans over the age of 55 entered the labor force at a growth rate of 3.49 percent per year over the years 1990 to 2011, a rate one and half percent above their population growth rate in the same years. Those from the ages of 25 to 54 entered the labor force looking for work at a growth rate of .68 percent per year for the years 1990 to 2011, a rate more than two percent below their population growth rate in the same years.

People entering the labor force at any age have no guarantee of finding work: they could find employment or be unemployed. Unemployed Americans over the age of 55 had an annual growth rate of 7.03 percent in the years 1990 to 2011, more than double the growth rate of those aged 25 to 54. If Americans at or near retirement age lack incentives to work because the benefits of Social Security make life so easy then Mr. Samuelson needs to tell us why so many people at or near retirement age keep working, or looking for work, so long and so hard.

Mr. Samuelson did not question if those over age 55, but not eligible for Medicare, keep working because they can only get affordable health care through a job. He did not question if the gradual end of defined benefits pension plans and replacement with defined contribution pension plans makes it harder to retire and gives incentives to work longer. He did not question why older Americans need incentives to work longer when younger Americans struggle to find self supporting jobs. The rest of us should question whether Mr. Samuelson wants to make excuses to cut Social Security, or find solutions that work for everybody.

Thursday, November 15, 2012

There were 693,025 MA degree graduates for the year ending June 2010, the last year of complete data. The MA is still relatively small compared to 1.6 million BA degree candidates but the MA degree has the highest growth rate of degrees including the AA, BA, and Ph.D. From 1990 to 2010 it was 3.87 percent a year compared to the average for all degrees at 2.78 percent.

Completing a master’s degree can be a smart choice, but it is a different choice than entering and completing a BA degree. There are general benefits for the BA degree for all degree programs, but much less so for a master’s degree. The benefit of a master’s degree tends to be specific and attach to a career, and typically after a career is underway.

Education may be the best example because elementary and secondary teachers can begin a career with a BA degree, but most school districts publish pay schedules with step increases that depend on years of experience and education. Finishing an MA degree moves teachers to a higher pay scale and makes it easy to compare financial benefits with tuition. A master’s degree typically opens up other positions in education administration, counseling, and curriculum development as well. These advantages help explain why more than 26.3 percent of the 693 thousand master’s degrees for 2010 are in education.

The Masters in Business Administration ranks second with 25.6 percent of 2010 master’s degrees, just behind education. The MBA degree will surpass education in the near future because MBA growth rates exceed the master’s in education by a wide margin. The average annual increase reached 7,013 for the five years from 2005-2010, the highest increase for major degree categories.

Many start a career with a BA in business or in professions like engineering, information systems, architecture and design but return for an MBA degree after getting some on-the-job experience. However, part of the growth in the MBA results from the growth of the business BA degree itself, which reached 358 thousand in 2010. With so many BA business candidates compared to new jobs, finishing an MBA has become a strategy for narrowing the field of job applicants in the corporate job market.

Allied health professions hold third place with 69 thousand master’s degrees, 10.0 percent of the master’s total. A master’s degree in any health profession assures benefits in a health care career but even more than most master’s degrees the benefits do not transfer to careers outside the health care industry.

Master’s degrees in advanced nursing specialties had over 20 thousand master’s degrees in 2010, more than any other health profession. Nursing does not require a master’s degree, but nursing has a long career ladder with nursing specialties to pursue with master’s training: maternal nurse, pediatric nurse, critical care nurse, geriatric nurse and quite a few more. Other popular master’s degrees in allied health are 5,687 MA degrees in public health, 5,293 in health care administration and management, 4,244 in occupational therapy, 2,437 in audiology, and 2,056 in speech pathology.

Combined counseling and social work have just under 50 thousand master’s degrees, equal to 6.7 percent of the 2010 total. A career in a counseling specialty like mental health, education or family counseling requires a master’s degree and state license, which makes the master’s an entry degree. There were almost 24 thousand master’s degrees in psychology including over 7 thousand in just the counseling psychology specialty. Mental health counseling offered as part of allied health programs have another 6 thousand degrees.

Counseling work overlaps some with social work, an area where there were more social work master’s degrees than BA degrees: 19.6 thousand master’s degrees, 14.6 thousand BA degrees. Social workers provide support and assistance obtaining aid more than therapy or counseling, which lets the states be more flexible about license and credentials, but those planning a career in social work should expect to finish a master’s degree.

The four degree fields mentioned so far, education, business, allied health, counseling and social work, account for just over 68 percent of the master’s degrees in 2010. For people with careers in these fields a master’s degree will almost certainly be a smart choice.

Not all of the remaining 32 percent of degrees are as obviously connected to a career. These include 45 thousand master’s degrees in area, ethnic and cultural studies, multidisciplinary science, philosophy, history, social science, and visual and performing arts. There are another 17 thousand MA’s in English language and literature, foreign languages and literatures, liberal arts and sciences, general studies and humanities.

The 85 thousand master’s degree in the sciences: biology, life science, natural science, chemistry, physics, and in the professions: architecture, engineering, information systems, need the basic knowledge implied by a BA degree to enter these programs. For example, someone pursuing a master’s degree in engineering probably already has a BA in engineering and some work experience, which suggests they know what an MA can do for them.

A few master’s degree programs are tailored to those switching careers. Library science had 85 BA degrees and 7,448 master’s degrees for 2010, which makes it ideal for people from many other careers to start another. Public administration with almost 36 thousand MA degrees and theology with almost 13 thousand MA degrees have more master’s degrees than BA degrees also suggesting people enter these programs from other careers and backgrounds.

In the last few years many have finished BA degrees only to be plagued by delays moving into career employment. Some decide “I might as well go on for a master’s degree now while I wait to start a career.” That has a high risk to be a bad choice. It is not only expensive and diverts time and energy away from a job search, the many specialties and sub-specialties in master’s programs make it less likely that degree skills will match job needs, or advance a career to come in the future. To make a master’s degree pay and advance a career the evidence suggests the best choice is a career first, and a master’s degree later.

Saturday, November 3, 2012

The New Geography of Jobs begins telling readers some anecdotal stories of people and cities that prospered and people and cities that did not. About midway into the Introduction we read “In this book, the focus is almost entirely on the forces that drive long-run trends.”

The book has seven chapters following the Introduction. Chapter 1 begins describing the long demise of manufacturing as staggering and “one of the most important facts in America’s economic history of the past six decades.” After a few pages the conversation turns to causes and what happened, but as the conversation moves along we read terms from economics like comparative advantage and the paradox of economic growth. As the chapter ends the decline becomes the inevitable result of markets, “The Tides of History.”

Pessimism turns to optimism in chapter two titled Smart Labor: Microchips, Movies, and Multipliers. The chapter starts with a story of Dominic Glynn of Pixar Animation studios as an example of talent and creativity that brings innovation and new jobs. Moretti tells readers the Internet sector has grown 634 percent in the past decade, but without telling us how many new jobs that created, nor providing a North American Industry Classification name or code that allows us to look up the government data he mentions.

As I read along I looked for ways to believe that jobs gains from innovation will be bigger than job losses in manufacturing, but I found more stories. Some are about innovators, some about places, others about economists who did studies, one about 300 percent growth of jobs in life science research, another about traded and non-traded sectors, and another about yoga, which became big business after actress Jennifer Aniston declared in People magazine that it “completely changed my life.” None of the stories helped me believe new jobs from innovation will meet America’s job requirements.

The next two chapters of eighty pages continue discussing people, companies, and new innovations in different cities. It starts with the success of Seattle and then on to Silicon Valley and other places. Several pages of charts associate cities with salaries and the percentage of workers with college degrees. Moretti finds a growing divergence of economic success among cities, which he associates with differences in life expectancy, family stability, political participation, and charitable giving.

Moretti labels successful hubs brain hubs that succeed from the benefits of agglomeration and thick labor markets, a term I never heard before, but he defines thick labor markets with a parable of Internet dating. In the parable one dating site has 100 women and 100 men, but another has 10 men and 10 women. Even though ratios are the same the “perfect” date is more likely at the bigger site. He concludes “Thick labor markets are better at matching employers with workers, and the ultimate match is closer to the ideal match.” With this we cannot disagree, even if we live in Paducah where the labor market may be thin.

Chapters five and six continue with short vignettes of success and failure and the inequality it generates for people and places. Moretti worries the lack of mobility and housing gentrification contributes to inequality and suggests moving vouchers for the unemployed. He wonders if there is help for poor cities like Flint and then begins a discussion of biotechnology and the benefits it brought to Cambridge, San Diego and the San Francisco Bay Area but he says “they were lucky.” They had “academic stars.” He wonders if universities can be an engine of growth but concludes “Overall my research suggests that the presence of a university is on average associated with a better-educated labor force and higher local wages.”

The last chapter wonders if America will prosper or decline, but predicts “cities with a large percentage of interconnected, highly educated workers will become the new factories where ideas and knowledge are forged.” After reviewing the returns to education back to 1964, the high cost of college, America’s low math scores, and the benefits of immigration, he ends citing Jane Jacobs from long ago and the process of destruction and regeneration, but no prediction on prosperity.

The book reads like an unedited transcript of cocktail conversation with topics and thoughts that zig n’ zag from one to another. Each paragraph turns into a new adventure. Questions raised in the text were seldom developed to any conclusion and the few that were often sound trivial. The text is sprinkled with economic terms along with superficial explanations that are unnecessary for economists but brief and inadequate for those who are not.

Despite dropping dozens of names and repeated references to data and studies there are no numbered footnotes anywhere in the text. Instead some notes at the back are listed by page number forcing readers to waste their time scanning notes to find if text was cited, or scanning text to find a note. Many notes have incomplete citations anyway: a title or author but no publisher, journal, page number or date. I am accustomed to standard footnote citations; I don’t believe in sources I cannot find.

Monday, October 15, 2012

The Republican platform includes a plank to form a commission to study a “metallic standard” for money. Possibly the politicos want to attract the Ron Paul vote since he has continued to advocate a gold standard as a form of economic discipline. I don’t know much about the politics of the gold, but I know a commission will be a waste of time and there will not be a gold standard in the United States or anywhere else.

Many years ago, before banks, gold circulated as a medium of exchange, but it was heavy and inconvenient from the beginning. Enterprising entrepreneurs opened gold depositories where people could store their gold safely. Depositors received a paper certificate as proof of their deposit.

If a depositor decided to buy a horse and wagon he would mosey over to the depository to make a withdrawal. Very quickly everyone got tired of going to a depository just to do a simple transaction. Soon the paper certificates began to circulate as money instead of the gold.

Very quickly the people running the depositories began to notice that buyers making withdrawals were followed by sellers making deposits. Then they realized they did not need to keep all of the gold deposits in the vaults to cover their customer withdrawals since withdrawals were followed by deposits. By keeping records of deposits and withdrawals they learned the maximum percentage, or maximum fraction, of the gold in the vaults they could loan out at interest without jeopardizing their ability to cover withdrawals of their customers.

That was the birth of the modern fractional banking system used by the United States and every other country in the universe. Banks hold a fraction of their reserves to pay on the deposits of their customers. From the beginning there were banking cheats and chiselers who made loans beyond the maximum safe percentage and were unable to cover their customer withdrawals. Banking abuses brought efforts to regulate banks; legal reserve requirements were imposed.

In 1999 the Clinton administration signed off on a banking deregulation bill pushed by the banking industry. The cheats and chiselers returned and just as before they were unable to cover their customer account withdrawals and had to be bailed out by the government and the Federal Reserve Bank.

Gold is a commodity and like any other commodity it fluctuates in price. When gold is money then changes in the price of gold will ripple through the economy causing inflation or deflation. From the beginning it was necessary for the government to stabilize the price of gold by holding large inventories to sell in a shortage, or buy in a surplus. Managing gold inventories was subject to the erratic success or failure of mining ventures and the erratic whim of hoarders and speculators.

In 1933, the United States left the gold standard, announcing it would no longer convert dollars to gold at a fixed price. Banks were allowed to designate other assets than gold as reserves, which make it easier to manage the money supply. Other countries followed and in 1971 the gold exchange standard for international payments ended by mutual agreement of the international community.

Using gold as money creates many problems that have to be solved, but has no benefits of any kind. It does not impose discipline because money is always a human decision. Humans decide what it is and how much of it there will be. The Republicans know this, but they are willing to pander for the Ron Raul vote. What Ron Paul thinks he is doing I have no idea, but gold as money is dead.

Tuesday, October 9, 2012

Growing opinion from outside of teaching expects teachers to produce a quality product measured by student test scores. The use of test scores in teacher evaluation was a primary contention for teachers in the Chicago teacher strike.

Manufactured products fail as a result of defective materials and workmanship and so the logic follows that students must fail from defective teaching and poor teachers. The solution reformers want will adjust teacher salary to be in proportion to their student’s test scores: a merit pay plan.

Close to 100 percent of career teachers understand that merit pay plans introduce personal competition into teaching which will detract and harm their efforts to collaborate and work together. Second grade teachers realize their students are last year’s first graders and next year’s third graders. Third grade teachers realize their students are last year’s second graders and so on. If they all work together and help each other, and the new teachers, then the skills and test scores of all students might rise as students go from teacher to teacher and grade to grade.

However, some test scores will always be higher than others. Merit pay proposals and plans that reward faculty based on the highest test scores are like sports competition where there is a winner and a loser, but no incentive to work together. Pay plans that help education and improve test scores will need to recognize that teachers do not work in isolation and should not be treated as if they do.

Low entry salaries for teachers help school systems conserve funds while new teachers decide if they will take the time and make the effort to learn teaching and become professionals. Many do not, but those who do find that salary schedules reward experience and evidence of continuing education. Close to a 100 percent of teachers support evaluations based on their education and their easily assessable effort to use and develop class material, and to work and collaborate with other teachers to improve student learning across all grades and classes. Those who stay under this system can expect to earn a middle class salary by the middle of their career and more if they complete a master’s degree.

Chicago Mayor Rahm Emanuel wants to change that and make forty percent of teacher evaluations based on test scores. In a massive school system like Chicago test scores will vary by attendance and drop out rates, parental involvement, family income and some by teacher skill and experience. Teachers know the forty percent of their evaluation based on test scores is high enough to threaten the economic status and professional standing as teachers. It also happens to be bad for education.

Thursday, August 30, 2012

I recently saw Detropia, a new independent film making the rounds of America’s many film festivals. Detropia is a film of contrasts. As viewers we see the advanced decay of Detroit in panoramic views, but also up close as the camera wonders through ruined buildings and abandoned neighborhoods where the grass grows like waving wheat and few homes remain. Some views show summer scenes in colors galore that contrast with winter scenes of falling snow on somber gray streets, and a forlorn walker bundled against the cold. Shots of bulky and abandoned commercial and public buildings moldering in the sun add to the sense of loss. I thought I saw shots of the ruined Michigan Central railroad depot where I used to go with my parents and brother to pick up our grandmother on her visits long, long ago.

The misery of Detroit in pictures contrast with a selection of Detroiters we meet in between, and sometimes along with, the visual images. We meet a former teacher who now runs Raven Lounge, the head of U.A.W. local 22, a starving artist and a few more. They all express a gritty determination to stay and make Detroit revive. These are not a Pollyannaish bunch, they have an edge of cynicism and regret, but they are hometown Detroiters and they will stay and keep an eye on the main chance.

Along the way we meet the mayor, former basketball star Dave Bing, whose words and demeanor conveys good will. His city is broke with the loss of the automobile industry and over half its population, but it apparently has nearly 40 square miles of empty land, which he recognizes as a resource. He announces a plan for urban gardening on the empty land. Later when the camera flashes to a residential front porch we find three weary and dubious gents having an eye-rolling laugh at the mayor’s expense. They wonder if people will want to steal their tomatoes in the new agricultural economy of Detroit.

The mayor’s suggestion has the kernel of a bigger idea, which I would urge him to push further: a more self-sufficient regional economy. When Detroit prospered it produced and exported cars to other states and other countries. The earnings from car sales allowed Detroiters to specialize and then import what they needed from production elsewhere around the country and the world.

In a global economy, specializing in capital intensive industries carries risks and makes any region dependent on the whims of others, both in the corporate office and the erratic marketplace. The guys on the porch would be better off wondering how to produce tomatoes and then sell them locally to Detroiters, creating some jobs in the process, but more important re-circulating the money in the local economy to support other jobs.

Everyone eats, which makes food and food processing a good place to begin developing a less dependent and self-supporting local economy. The enormous companies that are necessary in the automobile industry are not necessary in food processing, nor in other industries and services. The country threw away its textile and apparel industries on the propaganda of free traders. Combined textile and apparel had 1.6 million jobs in 1990; 388 thousand are left in 2011, but it was not inevitable as economists like to say.

Creative retailers are finding small scale clothing production can be cost competitive when it is combined with retail operations. Retailers that produce on site in their own space capture the entire marketing margin and make better use of their employees for the seasonal fluctuations common to the cut and sew industry. Local production eliminates shipping charges from the Far East. Freight charges from China to Long Beach are only part of the expense to import clothing. There are Long Beach handling charges, warehouse in and out fees, forklift fees, customs entry fees, and customs duties, but the clothing shipment still sits in Long Beach. Add the shipping fee from Long Beach to wherever. When it is all added up local production does not look so far fetched.

The mayor needs Detroit banks committed to local lending and development and a readily identifiable Detroit label. Then he needs to convince Detroiters to pool their savings in local banks and to buy the Detroit label. It is a tough thing to do, but that is what I liked about Detropia. The contrast of misery and commitment give the impression these things might be possible in Detroit.

Detropia was a little confusing at first, but gradually clears up because the people who spoke in the film did a good job. They did not fumble and stumble but made their points clearly enough to suggest they had thought about and planned what they were going to say rather than impromptu interviews. The film makers flashed a few facts on the screen but avoided excessive narration. Detropia is an ambitious film worth seeing, but more important, worth thinking about.

Friday, August 10, 2012

I continue to see articles describing the grim job market for those pursing and finishing PhDs. A recent article from the Washington Post from July 7, 2012 (“U.S. pushes for more scientists, but the jobs aren’t there”) describes a surplus of science doctorates looking for research positions. The article uses examples of four people: a new neuroscientist yet to find work, two chemists laid off from pharmacy research, and a geneticist who spent 7 years as a low paid post doctoral research apprentice before leaving research entirely. It makes sober reading, especially when the politicians still talk about a future with new jobs in “high tech.” However, the bigger picture of jobs for doctorates in all fields gets worse day by day.

The accelerating growth of new PhDs in all fields is the first source of job problems for new graduates. In the year ending June 2000, 44.8 thousand finished doctorates. The number increased every single year until 70.2 thousand finished degrees in the year ending June 2010. (1) The totals come from the National Center for Education Statistics at the U.S. Department of Education. In the years from June 2000 to June 2010, 599.1 thousand new PhD’s were added to the supply of existing PhD holders.

No one pursing a PhD can afford to ignore the college teaching market which has over 80 percent of the jobs certain to require a PhD. From the years 2000 to 2010 the Bureau of Labor Statistics reports college faculty increased from nearly 1.31 million to 1.46 million, or about 150 thousand new jobs. A job market with potentially 599.1 thousand new PhD’s looking for 150 thousand new jobs guarantees some very difficult job hunting. Retirements in any field can help generate job openings even if job growth is slow, except that tenured college faculty have a well earned reputation for retiring later rather than sooner.

Any American thinking of a PhD should remember that up to a third of science and engineering PhDs in selected years are foreign nationals, especially over the last 20 years. Many foreign nationals started careers in the United States but more and more they return home to start new companies and work in research and teaching in their native universities. Americans with doctorates need to accept that the job market for doctorates looks more and more like a global market.

Optimists and pessimists both know that some fields are better than others. Take chemistry, a field where chemistry faculty in postsecondary education increased from 16 thousand in 2000 to 21.1 thousand in 2010, or 5.1 thousand more faculty jobs. Nearly 2.5 thousand finished chemistry doctorates in 2010 alone with over 20 thousand new chemistry doctorates reported from 2000 to 2010.

As a science field, it helps that chemists have more opportunities outside of teaching than other fields in social sciences and literature. The chemical manufacturing industry, especially the pharmaceutical industry and also the plastics, rubber, paint, and fertilizer industries, hires chemists. Firms specializing in engineering services and firms doing basic research also employ chemists. The Bureau of Labor Statistics reports jobs for just over 80 thousand chemists and 27 thousand chemical engineers in 2011.

Some of the jobs for chemists in research and manufacturing need a PhD, but the credential itself is not as important in business and research the way it is for academia. Management decides which jobs can be done without PhD skills, which puts PhD holders in competition with a plentiful supply of chemistry baccalaureate and master degree holders. Worse, jobs for chemists and chemical engineers are both down since 2000. The decline is small but there are thousands of new BA, MA as well as PhD degrees in chemistry, and similarly in other fields.

The surplus of doctorates and their dominant employment as college faculty has generated a dual job market where established faculty with tenure operate separately from new PhD’s. New PhD’s might find post doctoral research in the sciences or adjunct positions with a course by course salary or a temporary appointment, but those positions go for expansion or to replace retiring faculty. Tenured faculty do not lose their jobs or accept lower salaries to hire and pay new faculty. The burden of the surplus falls entirely on new PhDs to accept low salaries for an indefinite period.

Dual markets and the risk of long delays working at low wages make it difficult to forecast a rate of return to funds invested in a Ph.D. Where people leave their chosen field for other work the return drops to zero, but long delays on top of four to seven years in a graduate program suggests minimal returns on a large investment of tuition, time and effort. Those thinking of a PhD should think carefully.

Saturday, July 7, 2012

Millions of Americans cushioned themselves against the 2009-10 recession by doubling up in houses and apartments. That was the conclusion of the U. S. Census Bureau in a report released June 20, 2012. The number of adults sharing a household with family members, or other individuals, jumped from 17 to 18.7 percent of households from 2007 and 2010. Doubling up accounted for 22 million of 2010 households.

If logic services me doubling up guarantees one household could be at least two, or that 22 million households could be at least 44 million households. The report cited young adults as the most likely to be part of a doubled up household so that families with several children could be three or more households. Some undoubtedly share a household by choice, but the lack of job opportunities, low wages and high taxes on wage income depress opportunities to start new households.

Too often the popular media treats inequality as a matter of fairness, but these tiresome equity debates have turned into an indulgence America can no longer afford. America’s growing inequality depresses buying power and eliminates billions of dollars in transactions that would support production, income and jobs.

College graduates returning home to live with parents and find part time and temporary jobs limit billions of dollars that should be going into the spending stream for housing, along with home furnishings, apartment and homeowners insurance, clothing and consumer goods sales, which in turn cut the income of landlords, realtors, department stores, insurance agents, which in turn cuts tax revenues and spending for all levels of government, and so on.

The Bureau of Labor Statistics occupational employment data tells some of the inequality story. In 2009 I can find 199 occupations that employed 57.6 million people working in jobs that paid median wages less than $30,000. By 2011 those same 199 occupations employed 56.7 million people and 40 of the occupations had lower wages in 2011 than 2009; another 126 had some increase in wages but less than the rate of inflation. Cashier was one of the 33 remaining occupations with 2011 wages high enough to raise the buying power of cashiers, but the higher median for 2011 was still only $18,820.

Millions who work and live on wages have to double up on housing and do without health care and other necessities. The Obama administration’s social security tax cut generated a broad based increase in buying power that primarily explains the modest boost to the economy. In spite of the improvements the well-to-do keep defending policies like low tax rates on dividends and capital gains, knowing full well that people living on wages pay higher taxes to make up the lost revenue. I do not hear Democrats or Republicans willing to confront inequality as self defeating policy for all, but that is what it is now. Unless the inequality issue is addressed, the economy and job markets will continue to flounder indefinitely. Take that as a forecast.

Saturday, May 26, 2012

American colleges and universities continue to turn out graduates, and in ever increasing numbers. In the year ending June 2015, the last year of complete data, the National Center for Education Statistics at the United States Department of Education reported 1,013,971 graduates receiving associates degrees, 1,894,934 receiving Baccalaureate degrees, 758,708 receiving master's degrees, 87,302 receiving doctoral degrees, and 91,245 receiving professional degrees. Professional degrees include medical, pharmacy, veterinary, and law. This year the total of first time professional degrees was down slightly, primarily due to a drop in law degrees.

In 1900 the decennial census counted that year's college graduates; 27,410 received Baccalaureate Degrees from degree granting colleges. After reaching 186,500 in 1940, BA degrees climbed to 432,048 in 1950 when WWII veterans began taking advantage of the GI Bill of Rights and entered college in large numbers. Earned degrees declined some later in the 1950's; but surpassed all earlier numbers by 1964. Earned baccalaureate degrees jumped to 792,316 in June of 1970; 900 thousand in 1973; 1 million in 1989. In June 2000, 1,237,875 earned Baccalaureate degrees from accredited degree granting colleges and universities. The total of 2015 degrees, associate, masters, doctorate, and first-time professional in addition to the 1,894,934 BA degrees mentioned above came to 3,846,130 for the year ending June 2015.

Growth Rates

The numbers receiving United State College degrees continue to grow at a 2.60 percent annual average rate over the last 25 years; more than double the growth rate for the adult population and more than double the growth rate of the civilian labor force. The rate applies to the total of degrees granted from U.S. colleges and universities: associate, baccalaureate, masters, doctorates and first professional degrees. In this way America is getting better educated with a better educated workforce.

Growth rates vary widely by sex and by level of degree. Women have higher growth rates in all degree levels going back to 1990. Women were 41 percent of BA degrees in 1970 but they make up 57.1 percent of the degrees in 2015 leaving 42.9 percent to men. In 2015, women graduates out numbered the men in associates, baccalaureate, masters, doctorate degrees and professional degrees. For the past twenty years the growth rate of women degree candidates in professions, primarily law and medicine, was 4 times that of men. Women will become the majority in the professions.

The master's degree has the highest annual growth rate at 3.30 percent starting from June 1990. The rate for women is 3.74 percent; for men 2.73 percent. Doctorate degrees are second with a growth rate of 3.24 percent a year, but the growth rate is the combination of a 1.95 percent for men and a 4.82 percent women. The 87,302 who received doctoral degrees is the highest ever. Women doctorates were just slightly over a thousand a year in 1960, but women passed men in 2007 and every year since with 47,173 in 2015.

The associate’s degree holds third place with an annual average growth rate of 3.02 percent. Not only is the growth rate higher for women but women had 617,358 degrees compared to only 396,613 for men. Baccalaureate degrees hold fourth place at an annual growth rate 2.22 percent. That means 800,396 more BA degrees in 2015 than 1990. Again growth rates for women are higher than men: 2.45 percent for women, 1.93 percent for men.

The slowest annual growth rates come in first professional degrees with an annual growth rate of only 1.20 percent. Medical Doctor, also known as the MD degree, has the lowest growth rate of professional degrees: .79 percent. Among other medical specialties podiatry and chiropractic medicine have negative growth, and optometry have low growth: 1.22 percent. Osteopathic medicine had 5,355 graduates and a growth rate of 5.34 percent since 1990. None of these other medical degrees are as important to the country as the MD degree where America's medical schools turned out just 18,302 graduates in 2015, 2,364 more than 1985-86. Veterinary medicine has higher growth than the MD degree, 1.31 percent, although lower numbers. Pharmacy degrees have the highest growth rate among first professional degrees. Pharmacy is the third leading first time professional degree with 14,304 thousand graduates in 2015 compared to 1,244 in 1990. Outside of medicine, law degrees continue to grow at a slow pace of .21 percent a year with 40,024 graduates in 2015, down from 43,772 in June 2014, but still 44.4 percent of professional degrees.

Degree Program Details 2015

The National Center for Education Statistics defines individual degree programs within a hierarchy of programs defined as part of its Classification of Instructional Programs, or CIP for short. Individual degrees are grouped as part of related degrees in a broader group of functional levels. For example, civil engineering is an instructional degree program within the broader functional level, engineering. Political science is an instructional degree program within the broader functional level, social science.

Associates degrees, were up slightly to 1,013,971 in 2015. The National Center for Education Statistics first started reporting associates degrees in June of 1966 when they were 111,607 graduates. They have increased with almost every year bigger than the last. Degrees in liberal arts and science, general studies and humanities continue to grow with 367,626 degrees in 2015, which was 36.3 percent of associates degrees and more than any other field of study. Health professions hold second place with 199,991; business degrees have third place with 113,630 degrees. Many with associate’s degrees go on to finish baccalaureate degrees but many associates degree have career oriented degrees that could be terminal degrees for entry level training. Personal and culinary services, criminal justice and corrections, mechanics and repairers are three degrees with 76,495 graduates in 2015 and specific entry skills to begin a career. Computer and information sciences and support services continued a fifth year of increase with 36,401 degrees, 79 percent men. The total remains below the 46.2 thousand degrees of 2003. Many of the technical programs in nursing, health, engineering and architecture provide entry skills, but also a beginning path to baccalaureate or advanced degree training.

Baccalaureate degrees were up to 1,894,934 for the year ending June 2015. The National Center for Education Statistics reports data for Baccalaureate instructional degree programs, also known as fields of study, or majors. Business baccalaureate programs had 366,799 degrees, the highest percentage of total BA degrees: 19.2 percent. Health care and related professions has second place in 2015 with 216,228 degrees and a 5 year average increase with 17,319 degrees, the highest increase of the broad BA degree fields of study. Social science degrees including history, political science, sociology, economics and history dropped in 2015 but still holds third place with 166,944 degrees, or 8.81 percent of BA degrees. Social Science degrees have a 5-year average decrease of 1,167 degrees.

No other field of study with BA degrees has as much as 7 percent of degrees. Psychology has 117,557 degree candidates at 6.20 percent of degrees. Biology and life sciences, and visual and performing arts have over 5 percent, and communications, journalism and related studies have 4.78 percent. Education has 91,623 graduates at 4.84 percent, primarily elementary education. Important degrees in computer and information sciences did increase from 50,962 in 2013 to 59,581 BA degrees in 2015. Computer and information sciences have a 5-year average increase of 3,998. Engineering did better with a 5-year average increase of 5,041 and 97,858 BA degrees in 2015, a 5.16 percent share. Several BA fields of study show a decline since 1990: English language and literature, social sciences and history, and liberal arts and sciences, general studies, and humanities have a negative five year average change.

Masters degrees were up for the second year to 758,708 in 2015. The National Center for Education Statistics reports master’s degree data, which tends to be concentrated in a few fields. Like the Baccalaureate degree the masters degree in business holds first place with 185,222 master’s degrees and 133,896 of the degrees in the single program, the MBA degree. Business has 24.4 percent of master’s degrees. Education master’s degrees hold second place with 146,561 education degrees. All masters degrees in educational specialties are 19.3 percent of master’s degrees for the year ending June 2015. However, education masters degrees have a 5-year average decrease of 7,116.

Education is a degree level where there are more master’s degrees than baccalaureate degrees. Library science, social work, and counseling also have more masters than baccalaureate degrees. Library science had 99 BA degrees; 5,259 masters degrees for 2015. In education for nearly all the public schools teachers that earn masters degree in educational specialties open career opportunities teaching in specialized programs and move to a higher pay scale. The master degree is often directly tied with career opportunity and advancement.

Health professions hold third place with 102,897 masters degrees, 13.6 percent of the total. The largest master’s degree training occurs in nursing with 15,349 MSN degrees compared to 121,810 at the BA degree level. Public health is next with 8,482 degrees and health care administration and management is third place with 8,152 degrees.

There were 46,114 masters degrees reported for engineering masters programs. Computer and information services specialties had 31,474 master’s degrees for 2015, up almost 6 thousand from 2014. It has a five year average increase of 2,704, a modest increase compared to excellent job prospects. Chemistry leads physical science degrees, but with only 2,309 degrees. Mathematics had 7,589 master’s degrees but both math and science are small compared to business, education and health professions masters degrees.

Doctoral degrees were up to 87,302 for the year ending June 2015. Annual growth rates continue to be very high with a five year average increase of 3,415 doctorates. Doctoral candidates are up every year for over a decade. The health professions had 19,782 doctorates or 19.4 percent of doctorates for the year. The total does not include the MD degree, which is a professional degree. Second place goes to education with 11,772 doctorates and 12.1 percent of the total. Engineering had 10,239 PhD’s, or 10.7 percent of doctorates. Biology and biomedical sciences 8,053 degrees, or 9.1 percent; physical sciences 5,823 degrees, or 6.3 percent of doctorates. The biological and physical sciences have a higher share of doctorates than they do for baccalaureate degree programs. Specialties in psychology in 27 programs totaled 6,583 doctorates. In the social sciences, economics, political science, sociology and history have the largest share of the 4,828 social science doctorates. Business has only 3,116 doctorates, mostly the DBA. English language and literature shows a decline since 1970, but small growth after 1990 with 1,056 doctorates in 1990 and 1,418 in 2015.

Percentage Distribution of All Degrees Granted for the Year Ending June 2012

Sunday, May 20, 2012

On April 30, 2012 the associated press wrote a story titled “Move to kill planned rules on child farm labor draws criticism.” The article tells readers the Obama administration has abandoned a proposal to restrict the use of child labor on dangerous farm jobs. Restrictions for 16 year olds banned them from operating power driven farm machinery especially tractors, working at heights to protect against falls, and from castrating farm animals. Other limitations among 15 new rules banned 18 year olds from working in grain silos, feet lots and stock yards. Exemptions allowed exclusion for children working on their parent’s farm.

Proponents argued that four times more children are killed while performing farm work than those in all other industries combined. Republican opponents called the plan “impractical, heavy-handed regulation that ignored the reality of small farms.” Democrat Al Franken from a farm state offered his opposition. Sarah Palin chimed in from her Facebook page with her own apocalyptic worry: “If I wanted America to fail, I’d ban kids from farm work.” Gee?

The American Farm Bureau waxed sentimental because “the new prohibitions would upset traditions in which many children work on farms owned by uncles, grandparents and other relatives to reduce costs and learn how a farm operates.

We could suppose the Farm Bureau slipped up here when they worried about reducing cost because the quoted comments sound mostly intended to divert attention from the true purpose of their opposition: cheap labor.

Access to cheap immigrant labor helped reduce farm costs for a number of years, but Republicans have always had to fake their opposition to immigration because part of their right wing constituents don’t like it, even though their agri-business and corporate farm constituents do. Now that cheap immigrants are harder to find, the Republicans need to find some new source of cheap labor.

The article mentioned the government’s estimate that 300,000 children were involved out of about 1.4 million the Bureau of Labor Statistics reports working in wage and salary employment in agriculture. Since the government exempted children of family farms we can expect the 300,000 children in question are mostly helping to save money for corporate agriculture.

With 12 million unemployed and quite a few millions more leaving the labor force for lack of work it does appear adult replacements might be found, but possibly not at the pathetic wages big business expects to pay the kids. Since the farm price support subsidies go more and more to agri-business as they become fully integrated companies operating from the farm to the supermarket, we have to expect farm subsidies are much bigger than the difference between adult wages and the low wages to children.

Using child labor goes back many years. Congress passed the Keating-Owen Child Labor Act way back in 1916. It was an age when the courts were the primary source of aid to business in their eternal quest for cheap labor. With this in mind reformers were careful to craft a bill which relied on the commerce clause of the constitution to prohibit the transportation of products through interstate commerce if they were produced with child labor.

Using authority in the commerce clause was a practical strategy intended to defer to, or satisfy, the judicial review they were certain would come. In previous cases the court repeatedly ruled that the commerce clause of the constitution provided Congress with unqualified powers in the regulation of interstate commerce.

Even though the court had previously upheld a ban on the interstate transportation of adulterated drugs, and another banning the interstate sale of lottery tickets, and another banning the interstate transportation of women for immoral purposes, the justices searched for previously unheard of excuses to undo the child labor legislation.

In the Supreme Court case known as Hammer v. Dagenhart the court wrote that the interstate transportation of adulterated drugs, lottery tickets, and prostitutes created “harmful results” but the new law that restricted children under 14 from working more than 8 hours a day, or more than 6 days a week, or before 6 A.M. or after 7 P..M. in textile mills did not create “harmful results” and was therefore beyond the power of Congress to regulate.

In the wrap up to their long and convoluted written opinion the justices declared the Keating-Owen Child Labor act “repugnant” to the constitution. The Supreme Court opinion came on June 3, 1918, or 94 years before Sarah Palin told us America will fail banning kids from farm work. Decide for yourself, but I do not see satisfactory progress in America’s attitudes toward exploiting children, or making excuses for using cheap child labor.

Monday, May 7, 2012

Physical therapy services are part of health care that is delivered by people working in three occupations: Physical Therapists, Physical Therapist Assistants and Physical Therapist Aides. The three and their Standard Occupational Classification codes are defined below.

31-2021 Physical Therapist Assistants
Assist physical therapists in providing physical therapy treatments and procedures. May, in accordance with State laws, assist in the development of treatment plans, carry out routine functions, document the progress of treatment, and modify specific treatments in accordance with patient status and within the scope of treatment plans established by a physical therapist. Generally requires formal training.

31-2022 Physical Therapist Aides
Under close supervision of a physical therapist or physical therapy assistant, perform only delegated, selected, or routine tasks in specific situations. These duties include preparing the patient and the treatment area.

Physical therapists need a license that usually requires a master’s degree for entry. Around 85 percent work in health care, 5 percent in education and a few try to work as self employed. Physical therapy assistants and aides are tied to working for, or with, physical therapists. Physical therapy assistants do not have specific educational requirements and only about 20 percent have a BA degree or above in any field.

Physical therapy services are like many services in and out of health care in that the occupational definition and work of physical therapist establishes that physical therapists can do all of the work of physical therapy assistants and physical therapy aides. Physical therapy assistants can do all the work of physical therapy aides. Employers have the financial incentive to limit the work of physical therapists to that part of physical therapy that requires the training and license of a physical therapist. By splitting the work into more specialized parts they can hire much cheaper assistants and aides to do the other work and limit the number of jobs they must have for the higher paid work. That goes on in millions of America’s jobs.

National employment as physical therapists reached 185,440 as of 2011, which the Bureau of Labor Statistics classifies as a job needing at least BA degree skills. Jobs are up by an average of 5,912 a year since 2000 with a growth rate far above the national average. Physical therapy assistants had 67,550 jobs in 2011 with jobs up an average of 2,130 a year since 2000 and a growth rate above the national average. Physical therapy aides had 47,640 jobs with jobs up an average of 1,184 a year and growth above the national average.

In general physical therapy degree training is either BA, or usually MA, but any degree training for an assistant might be an associate’s degree in some allied health program. Expect though that no one wants to do physical therapy degree training to be a physical therapy assistant. There is no AA degree in physical therapy as such, but various exercise and health degrees. Therefore, much of the work of the assistant is on the job training. The physical therapy aide job requires some on the job training but should be considered dead end work by itself.

Job growth is not the only measure of new hiring. Job openings equal job growth and the number of net replacements. Net replacements are people who permanently leave an occupation for another occupation or retirement and must be replaced before there can be any job growth. Job openings for physical therapists have been averaging around 8,705 per year in recent years; openings for physical therapy assistants are expected to average 3,525 a year; for physical therapy aides 2,324 a year.

Averages are not used much in wage data. A few high wages pull up the average and make it unrepresentative. Instead a distribution range of wages is published with the 10th, 25th, median, 75th, and 90th percentiles of wages. A 10th percentile wage means 10 percent working in this job have wages equal to or less than the 10th percentile wage and so on. Annual wages are converted to hourly wages by dividing annual by 2,080.

The entry wage in the 10th percentile for physical therapists is reported as $54,710 in 2011. The median wage is $78,270, and the 90th percentile wage is $110,670. Yearly reported wage increases barely keep up with inflation especially in the higher range of salary. Buying power continues to erode at the median and 90th percentile wage levels despite increases in monetary wages. Entry level wages boosted buying power at the 10th and 25th percentile wage levels compared to the 8 to 10 years ago.

The entry wage in the 10th percentile for physical therapy assistants is reported as $32,030 in 2011. The median wage is $51,040, and the 90th percentile wage is $71,200. Yearly reported wage have been keeping up with inflation. Buying power is up moderately over the last 7 to 8 years.

The entry wage in the 10th percentile for physical therapy aides is reported as $17,180 in 2011. The median wage is $23,680, and the 90th percentile wage is $35,340. Yearly reported wage increases are not keeping up with inflation. Buying power is about the same or a little lower over the last 7 to 8 years.

New BA, MA and doctorate degrees in Physical Therapy are part of 11 different Rehabilitation and Therapeutic Professional degree specialties and those 11 are part of 164 degree programs in health professions and related clinical sciences. BA degrees in physical therapy programs totaled 550 for the year ending 2009. The total is down from the recent high of 778 degrees in 2005. However, the MA degree and Doctorate degree are more important than a BA degree in physical therapy. The MA degree had 1,360 graduates in the year ending June 2009, but that was down from 4,687 in 2002. The doctorate degree had 7,192 degrees in the year ending June 2009, but that was up from 966 in 2001. Therefore the doctorate degree is replacing other physical therapy degrees as the education level for physical therapy.

Thursday, April 26, 2012

Standard Occupational Classification #21-1093 Social and Human Service Assistants

SOC Definition--Assist professionals from a wide variety of fields, such as psychology, rehabilitation, or social work, to provide client services, as well as support for families. May assist clients in identifying available benefits and social and community services and help clients obtain them. May assist social workers with developing, organizing, and conducting programs to prevent and resolve problems relevant to substance abuse, human relationships, rehabilitation, or adult daycare.

Examples of other common names in use--Addictions Counselor Assistant, Case Work Aide, Clinical Social Work Aide, Family Service Assistant, Human Services Worker, Social Work Assistant

Social and human service assistants exclude those working in occupations (21-1015) Rehabilitation Counselors, (39-9021) Personal and Home Care Aides, (43-4061) Eligibility Interviewers, Government Programs, and (29-2053) Psychiatric Technicians.

Social and human service assistants work in both public and private social assistance establishments. Around 32-36 percent work in private sector firms doing individual and family services, community food and housing services, and vocational rehabilitation services. About 25 to 28 percent work in government social assistance about evenly split between local and state government. They are also employed directly in the health care industry: 16 to 17 percent in nursing and residential care facilities, 5 to 6 percent in outpatient care centers, 4 to 5 percent in hospitals. Religious, civic and social organizations also sponsor some social assistance and hire 5 to 6 percent of social and human service assistants. Almost none are self employed, virtually all work for establishments.

Social and human resource assistants are one of a group of occupations common to social assistance. Include six counseling specialty occupations and four social work occupations as work common to social assistance. Social and human resource assistants are the lowest paid of social assistance occupations. Like many other jobs in education and health care that have aide or assistant in their job titles social and human resource assistants do the time consuming parts of coordinating and delivering services or treatments to clients in order to save time for higher paid professional staff. However, licensing and certification for most social service occupations, especially social work, are less severe than health care. For this reason, social and human resource assistants, especially those with BA degrees, should explore possibilities for advancement once they are familiar with the work.

National employment as Social and Human Service Assistants reached 359,860 as of 2011. Jobs are up by an average of 8,995 a year since 2000 with a growth rate far above the national average. In the recently updated BLS Education and Training Classification assignments for social and human service assistants list high school diploma or equivalent as the entry level education minimum, none for work experience in a related occupation and short term on the job training up to a month as necessary preparation to do the work.

However, survey data percentages are published for the social and human service assistant occupation. Survey results show an educational distribution of 2.4 percent of social and human service assistants have less than a high school degree, 14.4 percent have a high school degree, 20.9 percent have some college, but no degree, 9.5 percent have an associate’s degree, 37.9 percent have a baccalaureate degree, 13.5 percent have a master’s degree and 1.4 percent have a doctorate degree.

Job growth is not the only measure of new hiring. Job openings equal job growth and the number of net replacements. Net replacements are people who permanently leave an occupation for another occupation or retirement and must be replaced before there can be any job growth. Job openings for Social and Human Service Assistants have been averaging around 12,800 per year in recent years.

The basic wage data from the BLS occupational employment survey includes a wage distribution. Averages are not used much in wage data. A few high wages pull up the average and make it unrepresentative. Instead a distribution range of wages is published with the 10th, 25th, median, 75th, and 90th percentiles of wages. A 10th percentile wage means 10 percent working in this job have wages equal to or less than the 10th percentile wage and so on. Annual wages are converted to hourly wages by dividing annual by 2,080.

The entry wage in the 10th percentile for Social and Human Service Assistants is reported as $19,180 in 2011. The 25th percentile wage equals $22, 930. The median wage is $28,740, the 75th percentile wage equals $36,440 and the 90th percentile wage is $45,710. Yearly reported wage increases barely keep up with inflation across the whole salary distribution. Buying remains about the same for the past decade.

Monday, April 9, 2012

On April 2nd a year ago I wrote a 600 word piece on Wisconsin jobs through 2010. At the time Governor Walker delighted attacking and taunting state employees, but I recall part of his taunt was “I will create jobs in the private sector.” In 2010 the monthly average of statewide jobs was down 15.3 thousand from 2009. In 2011 the monthly average of statewide employment was up 11.9 thousand from 2010, not enough to replace the prior year’s losses and still 93 thousand jobs below the statewide average for 2000.

The 2011 Wisconsin increase was 40th of the 50 states and the District of Columbia. An increase of 11.9 thousand new jobs is an annual growth rate of .44 percent, less than half the national average. Alabama, Mississippi and Arkansas actually lost jobs as did Missouri and Montana, but none of the losers have as many jobs as Wisconsin. Utah with only 1.2 million statewide jobs managed to create more than 25 thousand new jobs. For a state like Wisconsin with 2.7 million jobs the 2011 increase was measly at best.

In the national economy three sub sectors of durable goods manufacturing in fabricated metals, machinery and automobiles generated a little over 200 thousand new jobs. Wisconsin was able to ride the wave of national increase by picking up 11 thousand durable goods manufacturing jobs with 9 thousand of the jobs in fabricated metals and machinery. Other manufacturing in Wisconsin nudged upward but with barely a thousand new jobs.

Otherwise there is not much good news to report on Wisconsin jobs. Construction employment dropped 4 thousand jobs with declines across all three construction sub sectors: building construction, heavy and civil engineering including highway construction and specialty trade contractors. Wisconsin construction employment in 2011 dropped to 3.3 percent of statewide employment. Even though construction employment is down in the national economy construction has 4.2 percent of national establishment jobs.

Private sector services did a little better with a net increase of 10.6 thousand jobs, but 6.9 thousand of the new jobs were in employment services and from temporary help services. Government employment was down 6.8 thousand with 2.2 thousand of the lost jobs in the public elementary and secondary schools.

The loss of government jobs pulled the annual growth rate in service employment down to .17 percent compared to 1.08 percent in the national economy. Private sector service jobs that exclude government losses did a little better at .6 percent a year but that was a third of the national growth rate in this category, which was 1.79 percent.

Lost service jobs in Wisconsin for 2011 covered a broad spectrum of industries in transportation, utilities, information services that include publishing, broadcasting, phone and Internet, along with losses in financial services in banking, credit, real estate, arts-entertainment-recreation, accommodations, restaurants, personal services like salons and laundries, and non-profit membership associations. Restaurants?

The total of losses in the private service sectors was a modest 6.8 thousand for the year, but Governor Walker promised more jobs, not less. Even though employment services including temporary help services added 6.9 thousand jobs, these jobs are part of a larger sub sector called administrative support services that includes services like telemarketing, security services, credit bureaus, janitorial and landscaping services and a few more. After excluding jobs from employment services and temporary help services the remaining support services lost jobs in 2011.

Wisconsin service sectors with more jobs had token gains and generally at growth rates well below the national average. For example, wholesale and retail trade added 2.4 thousand jobs in 2011, but that was a growth rate of .58 percent a year compared to 1.40 percent in the national economy. Health care employment inched up 3 thousand jobs, but here again the Wisconsin increase represents a growth rate of .83 percent when the national economy did much better at 1.63 percent.

Professional services like the law, accounting, computer design continues to be a smaller share of Wisconsin jobs than the national economy: 3.3 percent for Wisconsin, almost 5.9 percent nationally. Wisconsin added 1.6 thousand professional jobs in 2011 at an annual growth rate of 1.75 percent a year, but the same jobs were increasing at 3.36 percent a year in the national economy.

One other Wisconsin service sector picked up 3 thousand jobs, which came in a service sector called management-of-companies. This sector results from the use of establishments to report job data because a firm may have many establishments at different locations where some establishments within the firm might be just head offices or administrative offices. Unfortunately the management sub sector is a small sector even though the increase here is a little above the national growth rate.

Based on the Bureau of Labor Statistics data cited above, the private sector job performance equals failure on the governor’s private sector pledge to create jobs. Job gains in manufacturing give optimists a reason to feel better than last year, but Wisconsin depends on manufacturing for 16 percent of its jobs, which makes it vulnerable to changes in the national recovery. The poor performance in construction and private sector services does not suggest Wisconsin manufacturing will be able to pull the rest of the economy along.

Remove the 6.9 thousand new jobs from employment services and the 6.8 thousand jobs lost from government service and the net private service sector increase comes to 3.7 thousand jobs for all of 2011. If Wisconsin private service sector job growth equaled the national average, Wisconsin would have had 20.5 thousand more private sector service jobs in addition to the manufacturing gains.

Being somewhat acquainted with the vitriol and class divisions in Wisconsin politics I wonder if there are more than a few voters hoping jobs will decline. Those people will vote for Governor Walker, but the Wisconsin voters who work should remember that neighboring Minnesota, Illinois, Indiana and Michigan all did significantly better than Wisconsin on jobs in 2011.

Saturday, January 28, 2012

Wal-Mart has spawned a cottage industry in books and articles about Wal-Mart stores and what’s wrong with them for America. Discussion varies among many topics but low wages and high turnover get plenty of attention. Allow me to quote from a 2009 addition to the list of Wal-Mart books: the Retail Revolution by Nelson Lichtenstein. note(1) A Wal-Mart exec is quoted: “It’s hard to believe but turnover drops millions of dollars to the bottom line in cost savings for the company. When an experienced associate leaves the company he or she is replaced by an entry level associate at a lower wage. Turnover of associates, for this reason, actually appears from an expense standpoint, to be a competitive advantage.”

Nearly ten million people work as cashiers, retail salespersons, and first line supervisors/managers of retail sales workers. More than 80 percent of these three jobs are in the retail sector. Together they make up 6.8 percent of America’s jobs in 2010. (2)

The effect on wages from high turnover varies by occupation and industry. In the retail industry high turnover generates a specific pattern of wage compression for jobs like cashier and retail salesperson: lower wage employees replace higher wage employees. The pattern is not unique to Wal-Mart, but given its size, employment totals and the admission that turnover helps profit, it is a specific pattern of wage changes that deserves the title, Wal-Mart Effect.

The Wal-Mart Effect can be defined and illustrated using data from the Occupational Employment Survey published annually by Bureau of Labor Statistics (BLS), U. S. Department of Labor. BLS Survey data partitions occupational wages at five percentile ranks: 10th, 25th, median, 75th and 90th percentiles. For example, the 10th percentile wage rate for an occupation is the wage where 10 percent of all workers earn that amount or less and where 90 percent of all workers earn that amount or more. For cashiers in Table I the 10th percentile wage of $12,200 in 2002 meaning 10 percent of America’s cashiers have annual earnings of $12,200 or less and 90 percent have annual earnings of $12,200 or more.

Table I – Cashiers

For cashiers the 10th percentile wage increased to $15,720 by 2010, a 28.9 percent increase in wages for the eight year period. The consumer price index increased by 21.1 percent in the period, which means the lowest paid cashiers got a 6.31 percent increase in inflation adjusted buying power.

Conversely, the 90th percentile wage of $22,810 in 2002 meaning 90 percent of America’s cashiers have annual earnings of $22,810 or less and 10 percent have annual earnings of $22,810 or more. The 90th percentile wage increased to $25,780 in 2010, a 13 percent increase. However, at the 90th percentile wage the increase fell well below the inflation rate, causing a 6.75 percent decrease in buying power for the highest paid cashiers.

The cashier example illustrates the Wal-Mart Effect which can be defined for any occupation where the lowest 25 percent of inflation adjusted wages increase over time as the highest 25 or 50 percent of inflation adjusted wages decrease over the same time period.

Cashiers had 3.3 million jobs in 2010, but wages for retail salespersons in Table II shows the Wal-Mart Effect for the nearly 4.2 million Americans working as retail salespersons. Table III shows the Wal-Mart Effect for more than 1.1 million first line supervisors/managers of retail workers.

Table II – Retail Salespersons

Table III - First-line supervisors/managers of retail sales workers

What happens to the individuals who leave Wal-Mart or the retail industry is not known. We can hope some of them got higher paying jobs in another occupation, but what happens to individuals is irrelevant to what is certain for jobs: the Wal-Mart Effect degrades an occupation and its jobs, whoever holds them. In the eight year period the highest paid of the 3.1 million cashiers lost buying power to the lowest paid cashiers as wages compressed into a narrower distribution of real wages.

The Wal-Mart Effect depends partly on company policy. The more companies do as Wal-Mart does and actively pursue high turnover as a profitable strategy the more likely wages will show the Wal-Mart Effect. Occupations needing college degree skills or other specialized occupational skills tend to be more resistant to the Wal-Mart Effect. Increasing or stable employment also makes it harder for an employer to eliminate more experienced staff. However, skills are not a guarantee because one of the worst examples of the Wal-Mart Effect occurs in the airline industry where Pilots, Co-pilots and Flight Engineers have lost 20 thousand jobs over the last decade and low paid pilots have replaced high paid pilots by the thousand.

Table IV shows the distribution of wages for 1.5 million Elementary School Teachers, Except Special Education, an occupation resistant to the Wal-Mart Effect. Wages in education typically come from a predetermined salary scale published by the local School Board. Individual pay is determined from a grid or spreadsheet of pay steps that depend on education and years of experience. Pay scale pay in education reflects the opinion that teachers can be trusted to improve with experience and education.

Table IV – Elementary School Teachers, Except Special Education

Recent media reports on education incorporate increasing amounts of coverage from critics who attack teachers and teaching. Growing opinion from outside of teaching expect teachers to produce a quality product measured by student test scores. Manufactured products fail as a result of defective materials and workmanship and so the logic follows that students must fail from defective teaching and poor teachers.

The solution reformers demand will adjust teacher salary in proportion to student test scores. Critics emphasize their concern for education, but a merit pay plan puts teacher pay into competition, promotes higher turnover, and increases the chances school districts will cut their budgets with Wal-Mart Effect savings.

Pay scales act as a partial substitute for seniority rules that require layoffs to be in reverse order of years of service. Seniority rules usually have to be negotiated within collective bargaining agreements, but where pay scales have general acceptance then job skills and time on the job make an occupation resistant to the Wal-Mart Effect. The political attack on unions increases the chance that more occupations will show Wal-Mart Effects.

Of the more than 800 occupations reported in the Occupational Employment Survey 68 show the Wal-Mart Effect from 2002 to 2010. Regrettably the job count in these 68 occupations total 23.4 million, mostly concentrated in three occupational categories: sales and related occupations, food preparation and serving occupations, and personal service occupations.

Over 90 percent of retail sales workers including supervisors of sales workers show the Wal-Mart Effect along with almost half of food service workers. Waiters and waitresses escaped Wal-Mart Effect changes probably because they have the best access to customers and customer tips. In restaurant and food service occupations like fast food cooks, dishwashers, and serving staff like counter attendants and hosts and hostesses at restaurants, lounges, and coffee shops turnover helped replace higher wage jobs with lower wage jobs. Among personal service occupations a little over 40 percent show Wal-Mart Effect wage changes, which include hairstylists, barbers, and especially 686 thousand personal and home care aides where turnover can be expected to be high.

In a 2004 article in Workforce Management author David Shuit reported Wal-Mart turnover of 600,000 to 700,000 a year. (3) It is an amazing number for a company that analysts like to describe in superlative terms. It makes Wal-Mart unrivaled in its ability to convert wages to profit by promoting high turnover, which is why the consequence for wages should be known as the Wal-Mart Effect.------(1) Nelson Lichtenstein, The Retail Revolution: How Wal-Mart Created a Brave New World of Business (New York, NY: Piccador, A metropolitan book Henry Holt and Company, 2009) page 150